New York (CNNMoney) - Firms offering student loan "debt relief" are deceiving borrowers into paying hundreds or even thousands of dollars for access to free government programs, according to a recent consumer watchdog report.

With student loan debt soaring to record levels, many graduates are turning to companies that claim to help reduce or manage their debts. However, some of these firms are charging borrowers initial fees as high as $1,600 and monthly fees as high as $50 to secure services that these borrowers could otherwise get for free, according to the report from the National Consumer Law Center.

While the government offers several relief programs free of charge, such as repayment plans based on a borrower's income level, getting through the red tape is "rarely easy," according to the report. And many borrowers are unaware that the programs even exist in the first place.

To conduct its investigation, undercover NCLC "mystery shoppers" contacted 10 randomly selected student loan relief companies, analyzed websites and reviewed a variety of actual contracts and consumer complaints. They found that the majority of firms surveyed didn't inform potential clients that the products they offered - most frequently loan consolidations - were actually free government programs, or the companies buried that information in the fine print.

soundoff(4 Responses)

Nelly Brown

Lack of awareness makes borrowers go into such problems. Student loan debt relief programs are there. These programs have been launched especially for the borrowers who are unable to manage student loan debts. I feel, students should go through the website such as http://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service instead of rushing to debt relief companies. This will help students avoid losing money and get into financial problems.

While the interest rate is important. The much deeper problem is the calculation of the loans the accrued interest daily, maximum penalties and fees
I have solutions! We need to keep the awareness Up every day talking to friends your Congressmen etc....
last report it's now $1.2 Trillion Student Loan Debt and it's growing at the fastest pace I have ever seen over the last 3 almost 4 years that I have been watching and researching for answers and solution
ProjectTuitionReimbursement

June 28, 2013 at 10:06 am |

mikeprojectdebtrelief

This is pretty interesting. Are these companies ripping people off, or are they charging the fee as compensation for the time spent navigating the red tape? I could see how some compensation may be necessary – but $1600 seems like a lot!

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